At the end of Year 1, Tony had a tax basis of $40,000 in Tall Ladders, Limited Partnership. Tony has a 20 percent profits interest in Tall Ladders. For Year 2, Tall Ladders will pay Tony a $10,000 guaranteed payment for extra services he provides to the partnership. Given the following income statement and balance sheet from Tall Ladders, what is Tony's adjusted tax basis at the end of Year 2?TALL LADDERS, LPIncome StatementYear 2Sales$65,000 COGS$(47,000)Gross Profit$18,000 Interest Income$3,000 Dividends$5,000 Long-Term Capital Gain$10,000 Other Income$15,000 Total Other Income$33,000 MACRS Depreciation$(20,000)Guaranteed Payments$(10,000)Charitable Contribution$(10,000)Fines and Penalties$(4,500)Other Expenses$(8,500)Total Other Expenses$(53,000)Net Income (Loss)$(2,000)TALL
LADDERS, LPBalance Sheet Year 1Year 2Assets$120,000$270,000Nonrecourse Liabilities$50,000$180,000Partner's Capital$70,000$90,000
What will be an ideal response?
Tony's adjusted basis at the end of Year 2 is $65,600. The required computations are reflected in the tables below:
| TONY'S OUTSIDE BASIS | |||
| Tony | |||
| Initial Tax Basis | $ | 40,000 | |
| Deemed Cash Contribution from Debt Increase | $ | 26,000 | |
| Interest Income | $ | 600 | |
| Dividends | $ | 1,000 | |
| LTCG | $ | 2,000 | |
| Fines and Penalties | $ | (900 | ) |
| Ordinary Business Loss | $ | (1,100 | ) |
| Charitable Contributions | $ | (2,000 | ) |
| Adjusted Tax Basis | $ | 65,600 | * |
| ? | |||
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